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Explain the implication the Law of One Price has for the price of a financial Security.

Asked by: 457 days ago - 1 Answers - 1092 views

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    The law of one price states in an efficient market, all equal goods will have one same price. This applies to the efficient market theory, which says that if all necessary information is available the public, securities (stocks, bonds, etc) will be put at the correct price level, implying no profit can be gained by fluctuations.

    All information is not made available to the public though (i.e. traders can’t predict the future), so the law of one price is only an approximation of the price of a security.

    Answer by Rick 195 days ago


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